Financial Questions: Will 401(k) recover?

Question: My 401(k) has taken a loss this year of over $10,000. I feel like everything I worked for all these years is slipping away fast. I'm 54, have $67,000 left. Had I known this would have happened, I would have pulled it out and placed it into a CD (certificate of deposit). What are the chances of that money being (ever) recovered?

-- Robert Morris

Answer: Although I am not a financial analyst, I can comment on the market aspect of the question.

Almost everyone has lost in the markets this year.

Your loss of about 13 percent is not at all unusual. How much one loses, of course, depends upon the types of investments one has made. Certain industries have been disasters this year, such as banking and construction. Investments in those fields lost much more than 13 percent -- often much more than 50 percent. On the other hand, investments in U.S. Treasury bills or insured bank certificates of deposit (CDs) haven't lost anything.

Your chances of recovering what you lost also depend upon how the market does and how your money is invested. The current market trauma has been very severe. We are not out of danger yet.

The current rescue proposal will be an important action, but will not be the end of the problem. Caution and diversification in investments is always warranted. That is especially true now. When markets bounce back, your chances of recovering your losses over several years are pretty good.

-- Christopher Korth

Korth is a professor of finance and international business at Western Michigan University. He will be among experts the Kalamazoo Gazette will tap in the coming days to answer questions about how to manage your life, business or housing issues through the current credit crisis.